€70m fresh milk antitrust fine 'costly decision for consumers and Valio'

02-Jul-2014 - Last updated on 03-Jul-2014 at 16:24 GMT

Finnish dairy giant Valio claims a €70m (US$95m) fine, imposed for abusing its dominant position in the country fresh milk sector, will reduce competition and shut it out of the market.

The Finnish Market Court last week rejected a second appeal from Valio against the €70m penalty proposed by the country's Competition and Consumer Authority (FCCA) in December 2012 for "dominant position in the production and wholesale market of fresh" between 2010 and 2012.

Responding, Valio branded the Market Court judgment a "costly decision for consumers and Valio."

In a statement, Valio, Finland's largest dairy, claimed the Market Court's rejection of its appeal prevents it operating a profitable milk business, reduces competition in the marketplace, and raises consumer prices.

“The decision prevents genuine competition in the milk market and shuts Valio out," said Pekka Laaksonen, CEO, Valio.

"The cost will be borne by consumers in an artificially high price for basic milk and by Valio in terms of a hampered ability to invest.”

Supreme Court appeal

Rejected by the Market Court twice, Valio has vowed to appeal the decision with the Finnish Supreme Administrative Court.

Valio says it will set a precedent by issuing a decision to the Supreme Administrative Court that defines "whether the profit generated by a cooperative business is an avoidable cost in terms of competition law."

“There has been no similar case in the world where a company has been condemned for pricing too low in an instance where a low price is in the interests of consumers and the company in the short and long term," continued Laaksonen.

“We are very disappointed that Valio’s profitable alternative for processing milk and competing for customers in the years 2010-2012 is viewed as predatory pricing. The decision conflicts with the need for efficient competition. No such case has ever been brought in Finland and the country is equipped with little expertise in a matter such as this, so we expected that the decision might go against us," said Laaksonen, referring to the rejection of its appeal.

FCCA "satisfied"

Weighing in, the FCCA said it is "satisfied" with the Market Court decision.

“It sends a strong signal that abuse of dominance and other conduct contrary to the Competition Act will not be tolerated," said Juhani Jokinen, director general, FCCA.

"It is in the interests of consumers to preserve the competitive structure of the market.”

FCCA proposed the €70m penalty in December 2012 on the back of an investigation, which concluded Valio made a strategic decision in February 2010 to “foreclose competition on the Finnish fresh milk market” by dropping the wholesale price of its fresh milk “considerably below costs.”

“The purpose of the under-pricing was to achieve a position close to a monopoly in the market and thereafter to raise the prices back to the level that existed before Arla Ingman had entered the market," FCCA said at the time.

Arla Ingman, Arla Foods' Finnish business, admitted in February 2013 that it had seriously considered abandoning the fresh milk market over the "unfair and illegal" pricing policy employed by Valio.